October 5, 2009

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FTC: Big Threats and no Guidance

Did you get a free product sample to review on your website? Are you getting paid for any kind of reviews of product endorsements?

Get ready for a bureaucratic mess complete with the threat of an $11,000 fine.

The FTC wants bloggers to disclose any benefit they receive from product reviews, even if that just means getting a free copy of some product so you can try it out and tell your users what you think.

The big unanswered question here is how this will affect affiliate marketing. There’s nothing about it at the FTC press release and as of publishing this post there was no one available to answer a phone call about it. (Now that we’re being regulated, you’d think they’d at least have to answer media inquiries. They’re probably just now realizing how many people are affected as the phones ring non-stop)

Advertisements that feature a consumer and convey his or her experience with a product or service as typical when that is not the case will be required to clearly disclose the results that consumers can generally expect.

Doesn’t sound too bad – you can’t go selling snake oil with the claim it cured four cancers – but then cover your ass with a “results not typical” disclaimer.

Thus, bloggers who make an endorsement must disclose the material connections they share with the seller of the product or service. Likewise, if a company refers in an advertisement to the findings of a research organization that conducted research sponsored by the company, the advertisement must disclose the connection between the advertiser and the research organization. And a paid endorsement – like any other advertisement – is deceptive if it makes false or misleading claims.

This part is a little bit trickier. On the one hand, they claim that all financial connections must be announced. Does this include affiliate marketing? No word there. Despite the seeming requirement, they go on to say an ad is only deceptive if it makes misleading claims. So if an honest review doesn’t disclose relationships, has an infraction actually occurred?

Unfortunately, the real affect here is that American bloggers and web publishers will enter the online economy with one arm tied behind their back and a constant fear that a random $11,000 fine might be headed there way. The FTC is pretending to look out for the little guy by threatening to fine the advertisers first, but when affiliate managers catch up to this new regulation, you can bet a whole lot of programs are about to shut down.

I mean, who needs an economy? Forget about the practical nightmare of trying to track and evaluate every review and product description page.

Meanwhile, your politicians are still sponsored by Goldman Sachs, NBC/GE, JP Morgan Chase, and all of the various weapons manufacturers. Heaven forbid we held them to the same standards we hold bloggers.

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Website Building Biz is a blog about the internet business in general. I started this up as a place to keep notes and ideas about making money in a digital economy, and it sort of took on a life of its own. Hopefully some of this information will be of use to you as well!